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Auckland under pressure

Increasing government pressure on Auckland Council over housing supply has drawn fire from across the political spectrum, but property experts believe it is necessary.

Tuesday, May 31st 2016, 3:00PM

by Miriam Bell

Property investor and developer David Whitburn

Over the last week, the government has been moving to force Auckland Council to free up more land for housing development in a bid to address the city’s severe supply shortage.

When delivering the Budget, Finance Minister Bill English said a National Policy Statement (NPS) on urban land development would soon be announced.

The NPS will include requirements for councils to release more land for residential development when growth demands it.

It is also set to include house price to income ratios which, if met, will force councils to respond by releasing enough land for development.

Following the Budget announcement, Prime Minister John Key told media that if councils did not do as directed by the NPS they will be breaching the law.

Releasing more land for development will have an impact on house prices, he said.

In response to Auckland Council’s argument that it can’t afford the infrastructure costs that will come with increased land release, Key said selling some assets might be a solution.

He also hinted that if Auckland Council doesn’t free up more land for housing, the government could appoint Commissioners to run the city.

This morning, Building and Housing Minister Nick Smith turned up the heat further.

The NPS is set to be announced on Thursday for one month's consultation in July, with an eye to making it operative by October, he told media.

Despite recently agreeing that Auckland’s urban boundaries need to be removed, opposition parties are frowning upon the government’s moves.

Both Labour and the Greens have said the government is trying to shift the blame for Auckland’s housing woes to the council, rather than taking steps, like building new state homes, to solve the problem.

NZ First leader Winston Peters said the government is being bullying and dictatorial and not addressing the core issue of record levels of immigration.

However, property commentators have responded to the government’s moves more positively – albeit with some reservations.

Prominent Auckland investor and developer David Whitburn understands the government’s frustration with the council and, also, why it is trying to make the council release more land.

But they have taken a sledgehammer approach when a more surgical method would have been better, he said.

“The focus of the government should be on encouraging a change of culture at the council. There is often a mentality of ‘what are the reasons this development can’t be done’ rather than ‘how can we give this development consent’.”

In his view, the release of more land for development is necessary but it needs to be carefully thought through – due to current infrastructure constraints and the sheer costs involved in developing the required new infrastructure.

Infrastructure bonds as suggested by the Labour Party could be one part of the solution to this problem, Whitburn said.

“Another part of the solution could be differential charges between greenfield developments outside the Metropolitan Urban Limit (MUL) and brownfield developments within the MUL, where developer contributions would be more for greenfield areas where there is no existing infrastructure.

“This could be a way of generating revenue to pay infrastructure bonds back. And it would all help to address the issue of how to pay for the infrastructure necessary for housing developments on newly released land.”

Whitburn added that releasing more land for development might slow the rate of price growth eventually, but it won’t show much effect for the next couple of years.

Property Institute chief executive Ashley Church agreed that increased land release might slow price growth, but said it won’t result in significant price drops.

He does think the government’s drive to get the council to release more land for development is necessary though.

“I support it – with the caveat that the land released needs to be contiguous to existing land lots. Just releasing land for development anywhere would be crazy.

“It needs to be done with some sort of logic. For that reason, it should follow the infrastructure development plans of utilities providers, like WaterCare and Auckland Transport, which are already in place.”

However, neither the government nor the council can develop the number of dwellings that are needed on their own, Church said.

“There needs to be a massive co-ordinated effort between all parties involved – including the private sector.

“There should be a focus on sending signals, not mixed messages, to the private sector to get developing and building, to start buying apartments, to get involved with development companies and sub-divisions.”

The funding of infrastructure is a huge issue, especially given the council’s financial situation, but it is, ultimately, an investment in the city and its future, he added.

“More needs to be done to address Auckland’s housing issues, but it is not easy, and it will take time and cost a lot.”

 

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